Archives: 05/2008

On Following the Money

Thomas Frank writes in the Wall Street Journal,

Consider the poor Washington libertarian. Everywhere else in America his type is an exotic species, a coffee-shop heretic who quotes from “Atlas Shrugged” and steers every conversation toward Ron Paul or gold. Take him or leave him, he doesn’t care. He is his own master.

Not so the Beltway variety. Here, in the very home of the taxing, regulating leviathan, the libertarian is such a commonplace and unremarkable bird that no one gives him a second glance. Here he is a factotum of the establishment, a tiny voice in a vast choir assembled by business and its tax-exempt front groups to sing the virtues of the entrepreneur.

And therein lies his dilemma. Almost by definition, our young libertarian’s job is to celebrate the profit motive from the offices of a not-for-profit organization. He is subsidized, in other words, to hymn the unsubsidized way of life. Rugged individualism may be his creed, but a rugged individual he ain’t.

This is more than just an abstract problem, as I discovered last week at a panel discussion hosted by America’s Future Foundation, one of the lesser libertarian nonprofits in the city. The questions that night were whether nonprofit work constitutes a “real job” and if moving to the private sector was “selling out” — ideas well known to any liberal do-gooder.

No, let’s not consider the beltway libertarian. Or at least, let’s not consider him all alone. Instead, let’s look at a couple of money trails. Here’s the first one:

1. Consumers buy products because they want or need them.

2. An entrepreneur, who has supplied these products, collects the money, which the consumer has given of his own free will.

3. The entrepreneur gives some of this money to his investors, some to his employees, and some he keeps for himself as a just reward.

4. The entrepreneur, his investors, or his employees give a portion of that money to a libertarian think tank like the Cato Institute. (Nearly all of Cato’s money comes from individual donors, not corporations or foundations.)

5. I work for the Cato Institute, and it pays me a salary.

There’s something remarkable about this money trail: every step is voluntary. Every step is the product of a private, individual decision. None of them are coerced.

Maybe I don’t live on the shores of Walden Pond. But it’s still hard to see how my individualism has been compromised. I might easily change my career direction; my boss might decide he doesn’t need my services; the donors might get fed up with Cato and stop giving; the entrepreneur might liquidate his business; the consumers might stop buying the products. At every point in the chain, the individual is in charge, and the same would be true if my own place in the chain were at position #3 rather than position #5. Either way, it’s all voluntary, and my libertarian conscience is clean.

Yes, yes, I might make more money elsewhere. But money is just one dimension of personal satisfaction. Although money is important, other values are worthwhile too. There’s nothing wrong about wanting a job that is personally satisfying, or that is intellectually stimulating, or that furthers your vision of the good. A libertarian appreciates the value and purpose of money (possibly more than most), but he’s allowed to have other values, too. It’s only cartoon plutocrats who refuse to care about anything else.

Now let’s look at another money trail. I have a hard time thinking it’s the better one:

1. The government takes your money in taxes. If you don’t pay, you’ll find an unscheduled appointment on your agenda, possibly involving men with guns.

2. The government turns this money over to “nonprofits.” Or perhaps to plain old profit-seeking corporations.

Bit of a difference there, isn’t it?

Cato does not accept any government money, and if it ever does, I suspect that many of us will exercise our voluntary choice and leave the organization. This is the money trail that libertarians should — and do — reject. Once again, my conscience is clean. This is also why Frank gets it wrong when he writes,

Private-sector Washington is one of the wealthiest places in America. Public-service Washington lags considerably behind. The chance of ditching the one for the other is what accounts for everything from the power of K Street to the infamous “revolving door,” by which a public servant takes a cushy corporate job after engineering some extravagant government favor for the corporation in question — or its clients.

The libertarian nonprofits that line the city’s streets often serve merely to rationalize this operation after the fact, giving a pious shine to the policies that are made in this unholy manner.

I don’t deny that it happens. But I do deny that these people are libertarians, whatever they happen to call themselves. One thing that separates the Cato Institute from many other public policy shops is that it has been perhaps the loudest in denouncing exactly these sorts of abuses. Here’s hoping we keep at it.

Headline Writers’ Lacking Literary Knowledge

Twice in two days now, I’ve come across news articles using the term “Big Brother” to refer to private sector information practices that affect privacy. Big Brother is not an appropriate shorthand here. In his book 1984, George Orwell gave the name “Big Brother” to the oppressive government that observed and controlled the lives of the book’s protagonists. The unique oppressive powers of this governmental entity were a central motif of the book.

Yesterday’s Washington Post had an article headlined “FTC Wants to Know What Big Brother Knows About You.” Is the Federal Trade Commision examining warrantless wiretapping, one hopes? Alas, no — they’re looking at “behavioral targeting” on the Web. This is when advertisers collect information about Web surfers with cookies, using it to direct more relevant ads their way.

Consumers who care to can “opt out” of nearly all “behavioral targeting” by setting their browsers not to receive third-party cookies. In both Internet Explorer and Firefox, the “Tools” pull-down has a selection called “Options.” Clicking the “Privacy” tab allows users to set blanket bans on cookies or site-specific preferences.

Behavioral targeting is in no way an exercise of the legal monopoly on coercion, much less an oppressive exercise of that power.

Ars Technica, an otherwise excellent tech publication, mangled the same literary reference in this headline: “Big Brother is Watching: Companies Snoop E-mail to Combat Leaks.” Employers monitoring communications on their systems are neither exercising government power nor oppressing their employees.

The most cogent, if not the kindest, explanation of this came in the comments to a recent blog post by Bruce Shneier (one I disagreed with). There, commenter “ManOnBlog” said:

You check your constitutional rights at the door when you go to work. They can tap your phone, read your email, paw through your computer, open your locker, etc. The list of what they can’t do legally is shorter than what they can do.

Commenter “@ ManOnBlog” replied:

> You check your constitutional rights at the door when you go to work.

No, you don’t.

> They can tap your phone

No, they can’t. They can tap *their* phone, which you use.

> Read your email

No, they can’t. They can read *their* email, which you use in the course of your job (although generally speaking they need to be VERY CAREFUL about this, because although your corporate mail store is indeed company property they have obligations to protect the individual information that is in that mail store if it is your personal info).

> paw through your computer

No, they can’t. They can paw through *their* computer. Again, see the email line above.

> open your locker

Ditto.

The distinction between government and private action is something more people should understand — especially people who write headlines for a living.

Will 2009 be 1965?

Forty four years ago today Lyndon Baines Johnson traveled to Ann Arbor, Michigan, to deliver a speech that outlined the vision that would guide his administration. The speech may be read profitably today. 

LBJ began that spring day by stating a goal: “The purpose of protecting the life of our Nation and preserving the liberty of our citizens is to pursue the happiness of our people. Our success in that pursuit is the test of our success as a Nation.”

The statement may be usefully compared to some earlier words about the purposes of American government: “We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.” These words from the Declaration of Independence reflect the individualistic, natural rights philosophy of the American founders.

LBJ’s words reflected a fundamentally different philosophy, Progressivism. Individuals do not pursue happiness within a framework of rights; government pursues happiness for them or rather for “our” people. Johnson noted two means to that collective end: the life of our Nation and the liberty of our citizens. The first is tautological, the second is revealing. The liberty of the individual is not a goal of government; it is rather the means for the collective pursuit of happiness.   The Great Society would realize that collective happiness. In the Great Society , “men are more concerned with the quality of their goals than the quantity of their goods.” They put aside “unbridled growth” and “the demands of commerce” to fulfill “the hunger for community.” Mere business and trade do produce a “soulless wealth” that is far short of national aspiration.  

The reader who sees in LBJ’s words as call to secular spirituality through government are not far wrong. He said to the students and faculty of the University of Michigan: “You have the chance never before afforded to any people in any age. You can help build a society where the demands of morality, and the needs of the spirit, can be realized in the life of the Nation.” The speech ends with the hope of a “new world,” a remaking of the nation.

Ironically, in light of what actually happened later, LBJ also claimed that “The solution to these problems does not rest on a massive program in Washington, nor can it rely solely on the strained resources of local authority. They require us to create new concepts of cooperation, a creative federalism, between the National Capital and the leaders of local communities.” Over the next decade, federal spending tripled.

Like LBJ, Barack Obama sees in politics and governing the possibility of secular transcendence. He is a far better orator than LBJ was, and his skills might well bring a third phase of Progressivism to the United States in 2009.

However, there is room for doubt. Obama lives in a different world than LBJ.

In 1965, Democrats held more than two-thirds of both chambers of Congress. As LBJ said on his inaugural night, “We can pass it all now.” Democrats may gain seats in Congress this year, but they will not have the same majorities LBJ had. President Obama will not say as LBJ did:“We can pass it all now.”

LBJ began his quest for the Great Society by cutting taxes. Obama will have to raise taxes to pursue his dreams. Excuse me, “our” dreams. Once “hope” and “change” cost real money, Obama may find Congress less willing to dream.

1n 1964, 76 percent of Americans trusted the federal government to do what is right almost always or most of the time. The Pew Research Center for the People and the Press recently reported that ”positive views of the federal government are at their lowest point in at least a decade. Americans may not be in the mood for a new crusade to change the world through collective coercion.

People skeptical of the beneficence of the federal government have reasons to be pessimistic in 2008. Neither candidate shares their skepticism fully. But the spring of 1964 was much worse. Barack Obama may expect to renew the left’s quest for a secular spirituality rooted in politics and government, a religion to replace the older faiths. But 2009 is unlikely to be 1965.  

Tom Davis: Policy, What’s That?

News of the intellectual demise of the Republican Party comes almost daily. In its coverage of the bipartisan vote in favor of the farm bill (which overrode a well-deserved Bush veto) the Washington Post included this reaction:

 ”If I was a farm-belt guy, I would be all over my district now, saying, ‘I stood with you, not the party of the president,’ said Rep. Tom Davis (R-Va.), who wrote to GOP leaders last week, urging them to defy Bush or at least allow rank-and-file members to save themselves. ‘Anytime you can separate yourself from someone with a 28 percent favorability rating, that’s a good thing.’ “

As Davis noted, he’s not a farm-belt guy. So one would think that he would want to stand up for the taxpayers in his suburban district and against the massive $300 billion grab by well-off farm businesses.

Indeed, Davis is retiring from Congress this year, so one would think that he would want to stand up for the general national interest for a change, rather than defending special interests and pushing his party’s advantage (as he sees it), as he often has during 14 years in the House.

Sadly, it’s all about politics for such legislators. The idea that members of Congress should promote policies to improve economic growth, increase individual freedom, and reform failed programs is completely foreign to them.

One can imagine that a conversation between Rep. Davis and an agricultural economist would go something like this:

Economist: The huge subsidies in this farm bill will distort markets, damage the economy, hurt the environment, and strain our international trade relationships.

Tom: What?

Economist: The agricultural industry is the most coddled in America, with dozens of programs subsidizing every aspect of the farm business. Why should this industry be specially favored by the government?

Tom: Huh?

Economist: Farm households have higher incomes than other American families. Farm incomes have risen rapidly in recent years, and farm prices are at record highs. Now should be the time to cut subsidies, not expand them.

Tom: I don’t follow.

Economist: Alas, I see that the farm lobby organized a massive campaign in favor of the farm bill, and they have bombarded Capitol Hill with propaganda, while twisting the arms of your colleagues.

Tom: Now I got ya! That’s right, us Republicans need to respond to the concerns of these hard-pressed farmers and help them out in rough times!

Economist: But, as I said, these are good times for farmers …

Tom:  Yes, yes, yes, we need to pass this bill and guarantee good times for the farmers–and, God willing, good times for GOP candidates this fall.

De-Debunker: Low-Hanging Fruit

Another day, another debunking.

DHS Assistant Secretary for Policy Stewart Baker has another effort to debunk information about the E-Verify program on DHS’ Leadership Journal blog. In this case, it’s “Debunking the ‘E-Verify Capacity Problem.’”

Critics say that only 60 thousand employers are registered with E-Verify, while there are 6 million employers in the U.S. But this is an example of using an accurate statistic to produce a misleading result. Many of those 6 million employers won’t hire a single worker this year. Others will hire thousands. What counts is how many individual hires the system can handle… . Based on a recent load testing, the system has the capacity to handle 240 million queries a year. That’s three to four times the number of people who are usually hired in a given year.

Fair enough, and frankly I hadn’t been aware of there being an argument about a “capacity” problem with E-Verify’s servers or data systems.

Running a Web search on “E-Verify capacity” to see what the capacity argument is, I found little other than a Government Accountability Office report which says the following:

A mandatory E-Verify program would necessitate an increased capacity at both U.S. Citizenship and Immigration Services (USCIS) and SSA to accommodate the estimated 7.4 million employers in the United States… . Although DHS has not prepared official cost figures, USCIS officials estimated that a mandatory E-Verify program could cost a total of about $765 million for fiscal years 2009 through 2012 if only newly hired employees are queried through the program and about $838 million over the same 4-year period if both newly hired and current employees are queried… . . SSA has estimated that implementation of a mandatory E-Verify program would cost a total of about $281 million and require hiring 700 new employees for a total of 2,325 additional workyears for fiscal years 2009 through 2013.

That’s a very different kind of capacity - and very expensive. I have written here before about a Social Security Administration workers’ union official who pointed out the lacking capacity at SSA to handle national E-Verify.

The difference in these kinds of capacity reveals an inference in my and others’ criticism of E-Verify that Baker and the folks at DHS may be missing. I may have been too obscure again yesterday when I wrote, “Just because you have a glass coffee table, that doesn’t mean you can build a glass sundeck.”

The class of businesses currently using E-Verify is particularly proactive about not hiring illegal immigrants – either because they are naturally fastidious or because they have been subject to enforcement actions that practically or legally require it. They may self-select against hiring potential illegal immigrants – perhaps avoiding native or fluent Spanish speakers, for example. If their motivation is avoiding trouble with the feds, these employers may not tell workers about tentative nonconfirmations, getting rid of them under other pretenses. Or they may prescreen workers using E-Verify before even hiring them. (Sure, E-Verify fan, tell yourself it’s against the rules - like driving over the speed limit is against the rules.) This all makes it look to folks like Stewart Baker like they’re catching illegal workers.

For what they’re worth, these employers are the low-hanging fruit for the E-Verify program. This is the best E-Verify will get. The rest of the nation’s employers, and the workers they hire, will produce higher error rates and new, more difficult problems.

The capacity of E-Verify’s databases and servers may be fine. The capacity of the various federal agencies to sort out the results of national E-Verify – not so good.

Too Far Inside

Don’t get me wrong. I’m a big fan of Inside Higher ED—the content’s free, they’ve run some stuff I’ve written, and co-founder Doug Lederman has graciously moderated a Cato forum—but those guys have got to get outside of higher ed a little more. That, at least, is what I’m forced to conclude if they really believe the teaser they wrote today for an article about federal efforts to stave off an as-yet nonexistent student loan crisis:

As federal agencies formally unveil plan to avert student loan availability crisis, officials earn grudging credit from players across the political and student aid spectrum.

What exactly constitutes the “political spectrum”? Apparently, a group that ranges all the way from the president of the Career College Association—which lobbies for for-profit colleges—to liberal Rep. George Miller (D-CA), with the head of the Project on Student Debt and the CEO of Sallie Mae in between. It’s a spectrum that consists exclusively of the color blue: People who think Washington should be heavily involved in student aid and send federal money their way–except for Miller, who does the sending.

Obviously, in the real world that’s no political spectrum at all, but maybe when you deal exclusively with Washington and higher ed, you feel like that’s a huge divide, indeed.

An Inexplicable Vote

Yesterday, the House passed the Renewable Energy and Job Creation Act, which is essentially a hodgepodge of tax provisions, most of which extend existing tax breaks, such as the R&D tax credit and production incentives for renewable fuels.  There are also a few new items, such as a tax cut specifically for trial lawyers who work on a contingency basis.  These tax breaks are offset with $55 billion in tax increases on hedge fund managers and multinational corporations.

The bill passed easily – virtually all Democrats supported it, along with a few dozen Republicans.

As reported in CongressDaily (subscription required), Republican Congressman David Hobson supported the bill with the following justification:

“Probably the responsible vote is ‘no,’ but how do you explain that in a media that’s frantic over gasoline prices? Frankly, this has nothing to do with gasoline prices, but you can’t explain it, and it taxes the rich guys,” Hobson said.

Incidentally, Congressman Hobson hails from a “safe” GOP district in Ohio.  He has been in Congress since 1990 and has won reelection each cycle with no less than 61 percent of the vote.  He already announced that he will retire at the end of the current Congress. Nonetheless, for political reasons, he supported a bill he knows to be unmeritorious.

If a retiring congressman from a safe district cannot muster up the gumption to oppose an admittedly bad bill that contains a hefty tax hike, what does that mean for the state of Congress?